By: Dr. Mike Campbell
The world’s largest economy has published its GDP figures for Q1 2012 and the economy grew by 0.5% which is hardly a cracking pace, all things considered. The annualised figure was 2.2% which marks a slowdown from the previous quarter’s annualised rate of 3%. The lacklustre performance was poorer than analysts had been predicting with most expecting a more modest slowing to 2.5%.
The Department of Commerce suggested that the disappointing figures were due to businesses holding back on investment during the quarter which depressed growth. The decline in business spending represented the first such fall since Q4 2009. The figures would have been worse but for an upturn in the fortunes of the automotive industry during the quarter. Vehicle sales contributed 1.12% to the GDP figure, building on a 0.47% increase in the final quarter of 2011. Investment in new inventories (stock) fell back to a contribution of 0.59% this quarter, falling back from a spike of 1.8% in the previous quarter.
Consumer expenditure was stronger in Q1 by 1.6%; approximately 70% of the US GDP is derived from domestic demand. Similarly, construction is an important sector for the US economy and home construction enjoyed its strongest quarter since 2010, helped by a milder winter.
Financial cuts by the Federal government, notably in defence spending, also had a negative impact on the GDP figure. Defence spending fell by 2.1% during the quarter; this contrasts with a 5.2% rise in the previous quarter.
The economic data emerging from the US has led to a decline in the value of the Dollar against other major currencies. The Greenback has declined by more than 2 cents against the Euro since the middle of April.